As 2016 draws to a close, now may be a great time to get a financial jump-start on a brand-new year. Here are some ideas to help.
Review Your Insurance for Savings
As your life changes, your insurance needs will too. That’s why it’s important to review your coverage once a year. Your insurance provider will help you find the best insurance for your unique situation and take advantage of all the discounts that are available to you. Many times, you can save dollars by bundling. Check out How to Save by Bundling Auto and Home Insurance.
Donate to Charity
Traditionally, toward year’s end, many of us go through closets and garages to donate clothing, household goods, computer equipment and even vehicles to charity. If you want to get a tax deduction for your own clean sweep, charity organizations like Goodwill and the Salvation Army provide useful guides to place a current market value on anything you’re donating. Remember, you must keep receipts on any contributions that add up to more than $250. The same goes for cash and checks. Another way to get a sizeable tax deduction is to gift shares of stock to charity. You’ll be able to deduct the full amount of what the stock is worth in today’s market and potentially avoid paying any capital gains. As always, consult with your tax advisor for more information. And if you have a particular charity you’d like to donate to on a regular basis, you can setup automatic deductions from your bank account.To learn more, read the IRS’ Charitable Contribution Deductions.
Adjust Your Withholding
A big refund check from the IRS may be a nice windfall but it’s not a great financial strategy, because you’re giving the government an interest-free loan all year long. This IRS Withholding Calculator can help you adjust your withholding to lower the amount of taxes that are being withheld from each paycheck. Then, come tax time, your tax bill and refund should be at zero or close to it. So instead of overpaying the IRS, you can increase your personal savings.
Increase Your Retirement Contributions
Putting more money into your retirement account, such as a 401(k), 403(b), 457(b) or Traditional IRA, will help reduce your taxable income and build your savings for the future, too. If you have a company-sponsored retirement plan, you can increase your automatic payroll deductions for a set time period and then revert to your usual amount. And if you’re eligible, you can also open an Individual Retirement Account and have until the tax filing deadline to fund it.1
Sell Your Losing Investments
If you’ve made money on any investments that are not part of your retirement accounts, you can offset the amount of taxes you owe on your earnings–or capital gains–by selling off investments that have lost money (capital losses). This is called tax harvesting, and must be done by Dec. 31 to apply to your 2016 tax returns.1
Make Early Bird Mortgage and Tax Payments
By making your January mortgage payment a few days early—before Dec. 31—you’ll be able to deduct more mortgage interest on your tax return. And if you pay your property taxes early, this will also reduce your tax bill. Keep in mind that this if you do so in subsequent years, the amount you can deduct for mortgage interest and property taxes will decrease.
Use Up Your FSA Dollars
If you have allocated money via payroll deductions to a flexible spending account (FSA) to help pay for medical costs, you can contribute $2,550 pre-tax dollars annually. It’s a great way to save on health care costs using pre-tax dollars, but, according to what option is offered with your account, you can either carry over $500 in unused funds for 2017, or be given a two-and-a half-month grace period to use your FSA dollars.
Please consult a qualified tax professional for tax advice on your specific situation.
SFFCU does not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.
1Securities sold, advisory services are offered through CUNA Brokerage Services, Inc. (CBSI), member FINRA/SIPC, a registered broker/dealer and investment advisor. CBSI is under contract with SchoolsFirst FCU to make securities available to Members. Not NCUA/NCUSIF/FDIC insured, may lose value, no financial institution guarantee. Not a deposit of any financial institution. CUNA Brokerage Services, Inc. is a registered broker/dealer in all fifty states of the United States of America.
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Extra Credit provides general information to help improve our Member’s financial lives. Every situation is different, so please contact us for guidance on your specific needs. The advice provided in Extra Credit is not intended to serve as a substitute for speaking to a loan representative, financial advisor, or BALANCE counselor who can help tailor a solution for you.
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